JPMorgan Upgrades Outlook on Coinbase Stock (COIN) Following Crypto Market Rally
JPMorgan has revised its outlook on Coinbase stock (COIN) from “underweight” to “neutral” after witnessing a strong rally in the crypto market. The bank’s analysts believe that the launch of Bitcoin spot ETFs has led to significant price appreciation in Bitcoin, and now Ethereum. As a result, JPMorgan sees higher cryptocurrency prices sustaining and improving activity levels for Coinbase, leading to stronger earnings.
Expectations for Coinbase’s Q4 2023 Earnings
Coinbase is expected to release its Q4 2023 earnings report soon. Analysts anticipate a stronger performance for the company during this period due to increased global crypto trading activity and Bitcoin’s rise to $44,000 at the time. Initially, JPMorgan predicted that the crypto rally would be short-lived, but recent developments have proven otherwise.
Coinbase’s Revenue and Growth Potential
COIN has already experienced a 37% increase in share price since JPMorgan’s previous downgrade. The bank notes that Coinbase’s revenue is largely transaction-based, making it a direct beneficiary of a larger cryptocurrency market. Activity levels for Coinbase rose approximately 100% in Q4 2023 and are estimated to have increased by an additional 33% in 1Q24TD. Additionally, Coinbase’s ETH staking revenue has surged due to Ethereum’s recent 20% price rise.
Risks for Coinbase from ETF Adoption
While Coinbase stands to benefit from the growing crypto market, it also faces risks from ETF adoption. As BlackRock and Grayscale’s Bitcoin ETFs gain popularity, they may divert business away from Coinbase as an entry-level spot trading venue for Bitcoin. It’s worth noting that both BlackRock and Grayscale utilize Coinbase as a custodian for their coins.
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